Think Hard (or maybe it's not so hard for students of history) About Owning Well Managed Mining Companies

The Golden Truth

This Is Why We LOVE Mining Stocks Especially the ones that are really well-managed:   Hecla Mining announced today that it is going to set its quarterly dividend payout policy based on the average price of silver realized by the Company during the quarter.  Here's the formula they will use:  LINK  This is a huge statement about Hecla's confidence in their ability to continue growing their business (find new resources) AND their ability to manage their operations efficiently.  Further, yesterday Newmont announced that it will link its dividend payout to the price of gold AND the CEO said he thought the price of gold would keep rising.  And today, at the Denver Gold forum, Eldorado Gold announced a formula that would keep its dividend yield at 2%.  Expect that this will become a trend for the sector.  This is the kind of dividend policy every company should implement. But for me, and even more important to my investment thesis for holding the majority of my net worth in metals and mining stocks, is what this action portends for the industry as whole.  Since most people do not study history, you should know that back in the 1930's, Homestake Mining - one of just a few publicly-held mining companies - saw its stock price go from $80 in 1929 to $495 in 1935.  It also eventually paid out as much as $56 per share in dividends by 1935, including several monthly special dividends.  How many of you own tech stocks or beloved industrial stocks that have dividends yielding 11% or have a 70% dividend/cash flow payout ratio?  LOL (that's strictly a rhetorical question). Of course I don't expect history to repeat exactly like this, but I do expect that the large cap mining companies that want to see their stock price really appreciate in price will soon follow Hecla's lead.  I also expect that over the next few years we will see many of these stocks begin to have large dividend payouts and will be core positions in many mainstream mutual funds.  I will leave it to your imagination to think about what this will do to the stock prices of the large caps.  In other words, I expect that the price gains experienced in the 1930's by mining stocks like Homestake will be dwarfed by the gains we will see in the sector this time around.  Just think about how many trillions in excess money supply are sloshing around the world's financial system now vs. back in the 1930's, when currencies were directly linked to gold...

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